Luxembourg hailed the opening on Tuesday of the European headquarters of a third Chinese bank, underlining the tiny country’s ambition to corner a larger share of Europe’s offshore yuan business.

China Construction Bank joins global top 10 peers Bank of China and ICBC in establishing a continental base in the grand duchy – Europe’s largest centre for investment funds and a leading hub for private banking.

The opening comes two weeks after Beijing gave investors based in Britain the right to buy up to 80 billion yuan (HK$101 billion) of stocks, bonds and money market instruments in China, putting London ahead in the race to become the main offshore hub, besides Hong Kong, for trading in China’s currency and bonds.

Luxembourg-based investors cannot directly invest in China, but the country, covering an area of 2,586 square kilometres, has dealt with China for decades, and its yuan business has shot up in recent years.

The grand duchy is behind only Hong Kong in yuan-denominated “dim sum” bonds, with 24.5 billion yuan from the likes of Caterpillar and Volkswagen listed on its stock exchange.

Luxembourg is also home to a further 214 billion yuan of assets under management, according to its central bank.

We are not like London yet; we don’t have a quota. But if you look at assets under management, we are in a different league

Nicolas Mackel, Luxembourg for Finance

“We are not like London yet; we don’t have a quota,” said Nicolas Mackel, chief executive of sector development agency Luxembourg for Finance.

“But if you look at assets under management, we are in a different league.”

Offshore yuan loans in Luxembourg total some 62 billion yuan, according to PwC, the highest level in Europe, and deposits, 40 billion yuan, the largest pool in the euro zone.

Mackel expressed confidence that China would shortly agree a quota of investment for Luxembourg-domiciled investors.

“I’m confident it will happen before the New Year and I hope that’s more the Western [New Year] than the Chinese, although they are only a month apart,” he said.

“This is a very Chinese way of gradually opening up. It does not mean that London for the next five years will have an exclusive deal. The pace of change is accelerating.”

The offshore yuan business might not be as fierce a battle as some observers believe, with a market growing so rapidly that there will be ample to share around.

Every city, whether it is London or Luxembourg, has its unique strengths, and that will promote the internationalisation of the currency

Andrew Main, Stratton Street Capital

Luxembourg for Finance says overall offshore yuan deposits are forecast to grow to above 8 trillion yuan in 2015, a 10-fold increase from now, driven by a rise in trade settlement in the currency.

“For the Chinese, the strategic object is the internationalisation of the renminbi, the objective to make it used as widely as possible,” Mackel said. “They want to make renminbi a reserve currency ultimately.”

The head of yuan trading settlement at a European bank said that the internationalisation of the Chinese currency beyond Hong Kong was designed not to have cities competing but to ensure companies were comfortable trading in yuan.

About 18 per cent of China’s global trade is denominated in yuan, compared with less than 1 per cent nearly four years ago, when Beijing first started experiments in yuan internationalisation.